In Depth: China’s Never-Ending Bond Bull Run Fuels Speculation Regulators May Intervene

Central bank aims to avoid systemic risks as concern grows of a possible reversal of the high demand that's pushed yields down to record lows

Over the past year, China’s bond market has witnessed a surge in trading activities, driven primarily by an influx of funds into long-term government bonds.

The central bank has repeatedly issued warnings, and some large banks have come under investigation for selling long-term bonds and making illegal transactions, leading to speculation that regulators might intervene in the bond investments of financial institutions.

Since the start of 2024, the yield on 10-year government bonds has fallen by more than 40 basis points, while the yield on 30-year bonds dropped by over 50 basis points. By early August, bond prices had hit record highs.

Experts warn that continuous market trends — whether rising or falling — inevitably lead to the accumulation of risk, which can trigger a reversal when external shocks occur, like the redemption wave of China’s wealth-management products in 2022.

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